Decent Microsoft results, but where is the cloud? where is mobile?

Microsoft has released its results for the quarter ending March 31 2011. The figures are pretty good; but despite much talk about the cloud there is little sign that Microsoft is reinventing its business – unless you count Xbox, which has had another excellent quarter and is delivering meaningful operating income for the company.

Windows is a little down in the quarter, which Microsoft says in the press release is “in line with PC trends”; a small statement which disguises what must be real concern about the market drift towards iPads and SmartPhones that are made by other companies.

Server and tools put in a decent but unspectacular performance. Office on the other hand was a powerhouse this quarter. Again, the press release statement is telling:

the integrated innovation with SharePoint, Exchange, Lync and Dynamics CRM is driving significant growth for the division

If you substitute “lock-in” for “integrated” you will not be far wrong. As an aside, I spoke to a major UK retailer last week about its move towards desktop virtualization. The exec I spoke to mentioned in passing that as they rolled out SharePoint 2010, they also realised that they would have to upgrade to Office 2010 at the same time, otherwise too much stuff just would not work properly. From Microsoft’s point of view, that is “integration” working as designed.

Online on the other hand, which I understand is mainly Bing and advertising revenue, had yet another miserable quarter. Microsoft says it is pleased that revenue increased; but the loss is bigger too, and the loss is comfortably bigger than the revenue which means it spent more than twice what it earned in this segment. Perhaps it is worth it, if Google is rattled even slightly by Bing’s growing search share, up to a claimed 13.9% in the US, but this is the longest of hauls.

So where’s the cloud? Azure is not mentioned in the release, and I am not even sure in which segment it lives; my guess is Server and Tools. Office 365, which is not yet launched, does get a mention. I think Office 365 will be big business for Microsoft, though it is going to cannibalise the server business a little.

Mobile? Somewhere lost in Entertainment and devices, where clearly the major element is Xbox. Something curious happened when Kinect launched; as a hands-free controller the device is imperfect but its genuine innovation seems to have boosted the profile and sales of the Xbox generally. A couple of years ago when we were all talking about the red ring of death I would not have expected such excellent figures.

This company remains a powerhouse, but the fact that its fortunes remain closely tied to those of the PC, and its lack of progress in mobile devices, are a concern.